Unfortunately, most people don't think of a budget as a Game Plan, they think of it as a Boa Constrictor, squeezing all the fun out of their life. Not to me, I think of it as a game and the our budget is our scoreboard. I don't mind competing in a game without a scoreboard. but I'd rather not. I need to know if I'm winning or not and what the heck is going on in the game? Now, if you just want to play for fun and screw around then you don't need a scoreboard. But that's not life, this is the real deal and we're not playing around when it comes to financing your future. Setting up a budget (game plan) is definitely not the most fun part of the game for most of us, mostly because it's not the end, it's the just the beginning. We feel that budgeting will strangle us, constrict us from having any "FUN"! Yes, budgeting does constrict us in a way, but it's a GOOD way. It's a game plan! A budget sets you on a different course and gives you a good plan with a great purpose. A plan without a purpose isn't a plan, it's a big waste of time. Keep in mind everybody's financial situation is completely different, so don't compare your plan to someone else's; compare your's to your best self. When you look down your street and you get "car" envy or "toy" envy and you think you're keeping up with Joneses, you might be doing exactly that, you are keeping up with the Joneses. Unfortunately, the Joneses probably don't have a game plan (budget) either.
Some people make a budget to make sure they have enough money to pay their bills. (Have you ever felt like there was too much month at the end of your money?) Others make a budget to make sure they have enough money for their retirement account. Taking all ends of the spectrum into account, here is the most important question to ask yourself, "Why am I creating budget, a game plan?" You have to ask yourself that, and you must answer that question. Your answer to that question will tell you why and how to know exactly if your budget is meeting your financial needs.
There are many smart phone apps that can help you budget. But the bottom line is, are you willing to spend less than you make? If not, then all the smart phone apps in the world can't help you. When you can discipline yourself to spend less than you make, you can win this crazy money game! You will feel less stressed, more directed and ultimately free! Think of it like this: make all you can, give all you can, and invest all you can! Making all you can is maximizing your abilities to have multiple streams of income. Giving all you can is being charitable with your financial gifts: tithing, gifting and giving. (I love the word charity, it ends in I-T-Y = I Think of You.) And finally, invest all you can. Ultimately all three of these, making, giving and investing are about investing all you can. Making all you can is investing in yourself, maximizing your God- given talents and gifts to earn more so that you can give more. Giving is also investing in yourself because when you serve others you grow yourself. Investing all you can ultimately affords you financial peace and freedom to do what you want for yourself and others. Notice that there is not any mention of credit cards. The more CC's you have in your life (wallet/pocketbook) the NOISIER your life gets. We are trying to eliminate the NOISE so that we can have PEACE. If you are constantly paying CC bills, you will make it nearly impossible to ever pay yourself, i.e. investing.
There are a lot of different common expenses in our budgets that are not all monthly expenses. For example: car insurance (drives me crazy, no pun intended), Life insurance, vacations (love 'em, gotta have 'em!), gifts, property tax (hate it!) just to name a few. The way to handle periodic expenses is super simple. Add up all the annual cost for all of your periodic expenses, then divide by 12 and set that amount aside every month in a high-yield savings account.
There are also going to be some unexpected expenses that you'll have no idea when they're going to show up. For instance, home or car repairs. There is always guesswork involved, but the longer you work your budget, the more accurate you will become for those type of expenses. And even if you come up short you will definitely have some extra cash to handle those unexpected costs.
Budget for a Big Items
More often than not budgets neglect big purchases like a car or a refrigerator, or even a hot water heater. It's a great feeling when you can pay cash for a "new to you" car and not have a car payment. Notice I said "new to you", not "new car". That's a different story in a different blog, but you get the point. Some people may see this as unrealistic, but with a little bit of planning this is very possible. We have two paid off cars, and if at all possible, I would like to never a have car payment again! BOOM!
Keep it Simple
Most people avoid budgets for one common reason- the thought of tracking every single cent is unbearable. If that's you like it is me, there's a simple solution.
Group 'em Up
I just use 3 groups, housing, food and transportation, your categories may be slightly different, but you will eventually track all your comings and goings somehow, someway if you want to win. We keep it simple, I don't count for every roll of toilet paper, but I do know what it costs to run our house. We pay cash for food/groceries so that takes care of that. And we track our transportation dollars, cars, insurance, gas. I've just made bigger groups of all the smaller expenses.
It all boils down to this, know what you're spending and what you have coming in, it's not complicated; however, if you don't keep up with it, it gets very complicated. Think of it this way, what if you went way over budget at your workplace? Your boss would give you a notice and then if you continued to abuse the budget, you would probably get fired on the spot for being irresponsible with the company's finances. The same should hold true with your own business, the business of running your own home and your own life. Be responsible and hold yourself accountable so that you can look at your scoreboard (your budget, your bank account) and know that you are winning the game. Take a look at your scoreboard, are you winning?